Good morning,

This week, two sobering news items on abuse of public funds has necessitated revisiting IMANI’s solutions that went ignored.

  1. The first one –the state pension behemoth, Social Security and National Insurance Trust (SSNIT) has supervised yet another grand waste of pensioners’ funds in a $72 m software purchase scam. They bought the wrong software at an inflated cost. Intelligent software analysts have suggested the right software for digitizing pension records and its deployment should not have cost the poor pensioner more than $2m. The state’s tender evaluation committee must have rigged the procurement process in favour of amateur software companies who were pliant in padding the contract sums whenever their superiors wanted. We have heard the present contract sums oscillated between $17m, $27m, $34m, $66m and now $72m all within three days when the matter became public. We have seen too many of such in recent times. Last year, the farce repeated itself at the Driver and Vehicular Licensing Authority (DVLA) -where a contract sum (awarded on a non-competitive basis) quoted at $3.6 million for the supply of equipment to print drivers’ licenses interestingly metamorphosed into $9.9 million is just one evidence in a long list of brazen abuse of public funds and the impotence of the procurement law. The DVLA boss blamed the anomaly on human error despite the fact that the state had allegedly overpaid for the contract.

While we need to punish public officials culpable and retrieve wasted or stolen money, what worries us greatly at IMANI is the fact that these stories of brazen abuse are only heard after a political party has lost political power. We can only hope that our new government will prevent these from happening ever again. However, we have to urge the new government to adopt habits that can curb the anomaly. We are aware a ministry has been created to deal with public procurement. We need more than that. Last year, IMANI suggested that ‘’all government projects costing more than 10,000 units (with a unit equivalent to 1 GHS in 2016) will require a certificate of sound value before the award of contract.

A Value for Money report must accompany the certificate of sound value and should be published on a public website. Panel hearings should be open to the public. Where the panel has no expertise in a particular project domain at hand, a call for input from external assessors should be placed on the internet and published in leading dailies. If at the end of this extended period of evaluation the expertise remains unavailable, the matter should be referred to the Auditor General for pre-project auditing. The provision of a certificate of sound value should be time-bound, perhaps 30 calendar days upon receipt of the notice of an intent to sole-source or award enter into negotiations with the winner of a public bid from the Procurement Committee of the public agency or enterprise. There should be room for extension if a referral becomes warranted as above.

Ghana has to start making progress towards such levels of transparency if we are serious about protecting the public purse. Details of contracts awarded, including sub-contracts must be public knowledge. It is also important that Ghanaians are aware of persons behind companies that win such contracts. Such level of transparency allows the public to track where every cedi of public funds is going and for them to raise the necessary red flags. It goes a long way to also discourage corruption. Read the full paper and recommendations titled ‘’IMANI Alert: Institute of Public Projects Excellence; A Better Way to Fight Procurement-Inspired Corruption’’. ( http://www.imaniafrica.org/2016/01/22/imani-alert-institute-of-public-projects-excellence-a-better-way-to-fight-procurement-inspired-corruption/ )

  1. The second story–So, I heard this morning that outgrower sugarcane farmers who caught on the fever of a revamped sugarcane factory at Komenda in the Central Region of Ghana have now turned to local gin breweries or “akpeteshie” producers to sell their little produce. IMANI warned about this very pitfall and many others when the Komenda Sugar Factory was being championed. After spending $35m on it by the previous government, it is dead.

Folks, IMANI has never said any politician’s dream isn’t possible- we have simply asked that we quantify the ventures that public funds are applied. As the new government tries to bring the Komenda sugar factory back to life, and embark on its own littering of factories in each of Ghana’s 216 districts, it must be minded about the following risk factors IMANI shared with the previous government exactly two years ago this month but went unheeded.

IMANI Advice: Five risk factors of the Komenda Sugar Factory.

The idea of reviving the Komenda Sugar Factory goes back many decades. Seeing as there does not appear to be significant private sector interest in the asset, and given the unemployment situation in the country, it is completely understandable that government would want to reactivate the project.

There are however some important risks the government needs to mitigate.

  1. The $36m sourced for the project is completely unrealistic and will lead to commissioning challenges down the line. Since the early 70s several feasibility studies have been carried out. notably by the World Bank, and the expert consensus is that it will take about $90m minimum to do a good job of bringing the factory and plantation/out grower scheme up to scratch. It is not clear what government plans to raise more money are, but as it stands now the project is under-capitalised, so government needs to start looking for more resources.
  2. It will take no less than 1000 hectares of land to produce enough sugar cane to even begin to make this viable. In fact, using standard yields suggest a requirement for more than 7000 hectares to meet the planned throughput of the factory. This is significantly higher than the proven arable land available in the project catchment area. Given the irrigation and husbandry challenges in the area, and the significant deterioration of the water profile and soil quality over time, significant time, skills, and resources are needed to bring the agricultural potential of the area up to par. Even in the best of time, sugar cane rarely takes less than a year to be ready for harvest. Without a significant ramp-up in efforts, it is unlikely that Komenda or Asutuare can ever produce enough sugar cane to feed the plant. There has to be a contingency plan involving either the import of raw sugar for refining, since sourcing of sugar cane from Latin America may prove expensive due to shipping and logistics costs. But if that were ever to be required, the storage implications need to be assessed well in advance.

  3. At current sugar prices, the gross sales projections of $20 million a year are over-optimistic. Clearly the investors are justifying the under-capitalisation of the business by inflating the cash flow expectations.

  4. A superior marketing plan is required to dispose of 46,000 tons of sugar per year than has so far been produced.

  5. In any case, isn’t it about time we evaluated the proper role of government in business. Has government any more interventionist role in in sugar, rice and airlines apart from regulating sensibly? Has any government’s house been in order in this country first before venturing into profitable business? Even then its proper role is to provide opportunities for businesses to flourish independent of government. It must create the right investment atmosphere, with corruption free transparent governance. Coupled with infrastructure that works (transport network, utilities, an education system that meets needs of industry and a working health system that ensures that workers are able to remain healthy enough to earn well and pay taxes so that the government can take care of our persons and property by providing security.

Respectfully yours,

Franklin Cudjoe
Founding President & CEO, IMANI